Houston is witnessing a notable trend in its office investment sales market as early indicators suggest the potential for a substantial increase in dollar volume for 2025.
One brokerage has reported that the first quarter of 2025 saw half as many sales in Houston office investments compared to the total sales recorded in 2024.
This trend aligns with earlier predictions that sales dollar volumes could triple in the city this year.
According to Marty Hogan, managing director in the Houston office of JLL Capital Marketing Americas, JLL achieved 21 office building sales in the previous year, while nine transactions were closed in just the first quarter of 2025 alone.
The current dynamics of the market, characterized by developers stepping back from investments and increasing distress leading to forced sales, are contributing to heightened activity.
As the construction pipeline continues to dwindle, supply limitations are leaving investors eager for available properties.
Hogan noted that some of the deals made in the first quarter were remnants from last year, though the types of office products now emerging on the market suggest a significant surge in dollar volume is imminent this year.
“We’re absolutely seeing that play out,” Hogan stated.
He elaborated that there are several larger deals in their pipeline currently attracting interest.
Prominent among these is the Montrose Collective, a 189,000 square foot mixed-use project located at 888 Westheimer, developed by Radom Capital.
This property achieved 97% occupancy in its inaugural year and is now fully leased, making it an appealing prospect.
The expected transaction value of Montrose Collective is projected to be between $140 million and $150 million, a figure that stands to dwarf the largest transaction from last year, which reached $47 million.
Gabe Lerner, Executive Vice President at Lincoln Property Co., shared at a recent Bisnow event that the Montrose Collective’s eventual sale will significantly impact developers regarding potential cap rates for future projects.
In addition to Montrose Collective, JLL has placed Nine Ninety on the market—an office building located at the entrance of the CityCentre mixed-use development.
Developed in 2022 by Hines for Marathon Oil Corp., which was acquired by ConocoPhillips last year, Nine Ninety is now being offered for sale as Marathon prepares to vacate.
This 450,000 square foot property is described by Hogan as an “unbelievable building” despite the fact that it will be vacant upon sale.
Interest in purchasing vacant office space is on the rise as major institutions seek out such properties, where demand is growing.
The current environment of limited new inventory is compelling investors to look towards available office space—especially notable is the current construction of about 710,000 square feet of office space in Houston, which includes the 308,000 square foot CityCentre Six, pre-leased by The Dow Chemical Co., and a 210,000 square foot building being constructed by Service Corporation International.
Investor activity is also being fueled by distress in the market.
A recent purchase by LFFP Ashford Portfolio saw a three-building office portfolio in the Energy Corridor, totaling 570,000 square feet, acquired from a court-appointed receiver, as reported by JLL.
Moreover, SLS Properties successfully acquired the I.M. Pei-designed 285,000 square foot office building at 2425 W. Loop S., amid a prolonged court case related to its foreclosure and bankruptcy.
SLS Properties is also involved in redeveloping a former Chevron campus in Bellaire, indicative of their expansion efforts in the local market.
Another significant sale is the former Marathon Oil headquarters at 5555 San Felipe, a 1.2 million square foot skyscraper.
Starwood Property Trust, which obtained ownership through foreclosure in 2022, had originally contemplated a conversion of the property to residential use, but ultimately sold it to Energy Transfer, a gas and pipeline company expected to occupy the mostly vacant building.
The growing interest in older, distressed office buildings can be attributed to the swift absorption of newer spaces.
Class-A office properties built from 2015 onwards have a vacancy rate below 12%, significantly lower than the Houston market’s overall average of 26.3%.
This scarcity drives rental prices upwards, compelling tenants to consider properties built in the 1980s and 1990s.
Hogan posits that investors should focus on “top-tier, Tier 2 buildings” as they are likely to realize the next wave of absorption and rental rate increases.
“If you can buy a Tier 1 building, that’s great; there’s just really not too many on the market,” he concluded.
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